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Partner and Head of Family Law, Rugby
Anyone who is in business creates contracts on a daily basis and, if in writing, those contracts will often contain a clause along the lines of
‘this agreement contains the whole agreement between the parties’
But what happens if it doesn’t? What happens if the parties agreed something outside of the contract which doesn’t make it into the written agreement?
The UK courts have always used the notion of ‘implied terms’ to fill in gaps in the drafting. This is not to say that they would add just anything into the agreement but, traditionally, it allowed the courts discretion to order that further terms be added to the contract if:-
1. The proposed term is necessary because without it the contract would lack commercial or practical coherence; or
2. The proposed term was so obvious that, if someone had suggested to the parties that they include it in the contract, "they would testily suppress him with a common 'oh of course”
Recent decisions (notably Attorney General of Belize & Ors v Belize Telecom Ltd & Anor (Belize)) have diluted the test to the point where many have argued that a term may be added to the agreement if it is reasonable to do so.
However, in the recent case of Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd, the Supreme Court has taken the law back to the original test and has expressly stated that courts must construe the words of the actual contract before attempting to imply terms (albeit that construction may be later revisited)
The importance of this decision for anyone entering into a contract or involved in a contractual dispute is vast; it reinforces the importance of having a written contract in place from the outset which contains all the terms agreed between the parties because you may not be able to correct an omission later.
• Attorney General of Belize & Ors v Belize Telecom Ltd & Anor (Belize)  UKPC 10
• Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd & Anor  UKSC 72